Coke plans for upcoming sugar tax

Coca-Cola South Africa has introduced a variety of measures over the past few years to reduce the sugar content of its products.

Coke plans for upcoming sugar tax
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This is according the company’s managing director, Velaphi Ratshefola, in reaction to the government’s proposed tax on sugar-sweetened beverages (SSB).

“The strategy, which has been in place for several years now, focuses on three areas: increasing the marketing and variety of Diet, Light and Zero sugar alternatives to popular brands; introducing smaller pack sizes to encourage portion control; and reformulating the recipes of certain brands by reducing the sugar content,” he said, writing in an online opinion piece.

According to Ratshefola, price incentives on the zero sugar variants were yielding positive results, while “reformulation efforts” had resulted in a reduction in sugar in key brands.

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“The Coca-Cola system efforts will drive down the average unit sugar content across the portfolio by 22% to 24% by the end of 2018,” he said.

Implementation of the SSB tax was originally set for the new financial year, starting on 1 April.

However, the proposal published for comment in August 2016 has since been revised in the draft 2017 Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

According to a Treasury question-and-answer fact sheet, interested and affected parties had until 31 March to comment.

Government had introduced a threshold of 4g/100ml, below which no tax would be payable. Every gram above 4g/100ml would be taxed at 2,1c/gram. The fact sheet uses a ‘Coca-Cola formula’ to illustrate this.

“[F]or a can of Coke, which contains 330ml and just over eight teaspoons of sugar, the first three teaspoons will be tax-free (4g times 3.3, which is approximately three teaspoons), and the tax rate of 2,1c/g will be applied to the five teaspoons. The tax will therefore be approximately 46c.”

Ratshefola quoted the McKinsey Global Institute report on obesity, which stated that portion control (smaller bottles and packages) followed by reformulation (less sugar in each bottle) were the most effective methods of reducing obesity.

“Taxes on sugar-sweetened beverages (SSBs), the report shows, are not nearly as effective,” he added.

He believed that promoting an SSB tax would result in limited health benefits and “serious unintended economic consequences”, leading to job losses.

“Government, industry and civil society need to work together to create solutions that provide the desired health outcomes as well as economic opportunity, instead of economic risk. Let’s choose the better way,” he said.

In response to Farmer’s Weekly query, a spokesperson for National Treasury said that the tax would be implemented once the Parliamentary process for the relevant piece of legislation had been concluded.

The Treasury said that the draft 2017 Rates and Monetary Amounts and Amendment of Revenue Laws Bill, as well as the implementation date, were currently “undergoing the Parliamentary process”.

The SSB tax would come into effect “as soon as the necessary legislation is approved by Parliament and signed by the President”.